Financial institutions raise unique problems for corporate governance and culture that are not found in other corporate sectors. This book examines the various forms of organisational culture in financial institutions and its interplay with corporate governance and regulatory regimes. It provides a detailed survey and practical examination of key topical issues in the corporate governance and culture of financial institutions including boards and regulators, executive remuneration, ESG, regtech and AI.
Bringing together experts from a range of financial service professions as well as academia, the book explores how post-crisis executive remuneration, risk management and the function of boards have attracted the attention of regulators. It provides practical guidance on how to navigate the regulatory framework and how to implement best practice in corporate governance and culture into financial institutions.
Key Features:
Combines academic and industry expertise
Provides practical insights into regulatory concepts such as purposeful culture
Critically examines the legal and regulatory frameworks shaping governance and culture in financial institutions
Comprehensive coverage of a broad range of aspects from diversity to ESG and money laundering compliance
Corporate Governance and Culture in Financial Institutions is an essential resource for practising lawyers advising in the financial services sector, culture officers and HR professionals in financial institutions. Its discussions on diversity and compliance are also greatly beneficial to financial policymakers and regulators, as well as students and academics in corporate law and banking law.
Rezensionen / Stimmen
'This book provides a legal and interdisciplinary take on financial institution culture, which remains an important topic today for securing the resilience and sound management of banks and financial firms generally. The interaction between ESG orientations and their impact on financial firm culture is also explored through discussions on executive remuneration, risk management and governance developments in the financial sector. This book is a valuable addition to regulators', academics' and financiers' libraries.' -- Iris H-Y Chiu, University College London, UK 'This important book presents original and valuable contributions on the role of regulation in the corporate governance and organisational culture of financial firms, underlining the significance, unpredictability and complexity of these issues and showing how regulation can be shaped to meet the challenges and still remain appropriately nimble.' -- Philip Rawlings, UCL and Queen Mary University of London, UK 'An important contribution to advancing the recognition of the critical importance of purpose, culture, ethics and governance to financial services and the need to place these at the very heart of business models. Thought provoking and informative, we would encourage all with an interest in achieving enhanced culture and behaviour in financial services to read and refer to it frequently!' -- Marion Kelly and Jade McDonagh, Irish Banking Culture Board, Ireland 'As this fascinating new book demonstrates, corporate culture is rapidly gaining a central place in the pantheon of corporate governance. I have no doubt that this volume will be a key reference for governance scholars and financial practitioners for some time to come.' -- From the foreword by Roger Barker, Institute of Directors, UK
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Verlagsort
Zielgruppe
Maße
Höhe: 244 mm
Breite: 169 mm
ISBN-13
978-1-0353-1789-9 (9781035317899)
Copyright in bibliographic data and cover images is held by Nielsen Book Services Limited or by the publishers or by their respective licensors: all rights reserved.
Schweitzer Klassifikation
Edited by Andreas Kokkinis, Associate Professor, University of Birmingham and Anat Keller, Reader in Law, King's College London, UK
Contents
Foreword: The role of corporate culture in the financial sector xiv
Introduction to corporate governance and culture in financial institutions
1 Legal and regulatory framework for corporate governance and culture in financial institutions
A. INTRODUCTION 9
B. STRUCTURAL GOVERNANCE REQUIREMENTS 11
1. The Conventional UK Corporate Governance Framework 1 1
2. Specific Corporate Governance Requirements for Financial Institutions 1 3
C. SENIOR MANAGERS AND CERTIFICATION REGIME (SMCR) 17
1. Development of the SMCR 1 8
2. Scope and Applicable Framework 1 8
3. Elements of the SMCR 2 0
(a) Senior Managers Regime 2 0
(b) Certification regime 2 2
(c) Regulatory references 2 3
(d) Conduct rules 2 3
4. Enforcement 2 6
(a) Regulatory sanctions 2 6
(b) Criminal liability 2 8
5. Recent FCA Review and Reflections 2 9
D. EXECUTIVE REMUNERATION 31
1. Legal Framework on Remuneration for Listed Companies 3 2
2. Framework for Remuneration in Financial Institutions 3 2
3. Removal of the Bonus Cap 3 5
(a) Introduction of the bonus cap and regulatory resistance 3 6
(b) Decision to remove the bonus cap 3 7
(c) The effect of the bonus cap removal 3 8
E. FCA CONSUMER DUTY 40
1. Nature of the Requirements under the Consumer Duty 4 1
2. Scope 4 3
3. Embedding the Consumer Duty in Governance and Culture 4 4
(a) Guidance on governance and culture 4 5
(b) Responsibility of senior management 4 6
4. Breaches and Enforcement Action 4 7
F. DIVERSITY AND INCLUSION (DI) 48
1.REGULATORY AIMS RELATED TO DI 48
2.REGULATORY UNDERSTANDING OF DI 50
3. Current Rules on DI 5 1
(a) Board diversity 5 1
(b) Responsibility for DI 5 2
(c) Non-financial misconduct 5 2
4. Proposals for a New Framework for DI 5 3
G. CONCLUSION 55
2 Boards and regulators - Shaping and assessing organisational culture
A. INTRODUCTION 57
B. MEASURING CULTURE WITHIN AN ORGANISATION USING STAFF OPINION SURVEYS 58
C. ENCOURAGING TRUST AND ACCOUNTABILITY 60
D. ATTRACTING, RECRUITING, INDUCTING AND RETAINING STAFF 60
1. Attraction and Recruitment 6 0
2. Who and What Gets Celebrated 6 1
3. 'Casting a Shadow' and Corporate Culture 6 2
4. Cultural Memory 6 3
E. THE ROLE OF THE BOARD IN REMOVING OBSTACLES TO GOOD ORGANISATIONAL
CULTURE 63
1. The 'Three Lines of Defence' Delusion 6 3
2. The 'Directed Telescope' 6 6
3. Avoiding Setting the 'Wrong' Targets 6 7
F. THE IMPORTANCE OF A CULTURE OF 'SPEAKING UP' 67
1. Speaking Up Freely 6 7
2. Organisations in a State of Denial Exhibit a Poor Culture 6 8
3. Someone Is Always Aware Where Something Is Not Right 6 9
4. An Open Culture Is Critical to Communications 6 9
5. Guidance on Raising Concerns 7 0
6. Culture and Organisational Hierarchies 7 0
7. A Parallel Reporting Process 7 1
8. Instilling a Culture of Listening 7 3
G. THE POTENTIAL CULTURAL OBSTACLES WHICH OFTEN PREVENT BOARDS AND
SENIOR EXECUTIVES FINDING OUT WHAT IS GOING ON 74
1. Fear of 'Disloyal' Insiders Who Tell the Truth 7 4
2. The Psychological Fear of Taking Action 7 4
3. Poor Culture, Inwardly Focused Organisation, and with a Spirit of Omerta 7 4
4. Poor Culture and Denial 7 6
5. A Culture that Attacks Those Who Raise Concerns 7 7
6. The Risk of Approaching Concerns from a Legalistic Perspective 7 7
7. The Widespread Use of Non-disclosure Agreements 7 8
H. TRAINING, THE BOARD AND CORPORATE CULTURE 78
1. Training as Evidence of Good Culture 7 8
2. Board and Senior Executive Training and Culture 7 9
I. REGULATORY ACTIONS TO IMPROVE CULTURE IN REGULATED FIRMS 80
1. The UK's Senior Managers Certified Persons Regime (SMCR) 8 0
2. Regulatory Focus 8 2
J. CONCLUSION 83
3 Diversity and culture in UK financial services
A. INTRODUCTION 85
B. WHAT DOES GENDER DIVERSITY IN FINANCIAL SERVICES LOOK LIKE? 87
1. Senior Management and the Women in Finance Charter 8 7
2. Wider Corporation 8 9
C. PUBLIC DIVERSITY IN FINANCE 92
D. DIVERSITY AND CULTURE 93
1. What Is Meant by Culture? 9 3
2. How Does Culture Relate to Diversity? 9 5
3. Are Financial Services a Special Case? 9 9
E. ADDRESSING CULTURE AND DIVERSITY IN FINANCIAL SERVICES 101
1. UK Corporate Governance Code 102
2. Gender Pay Gap Legislation 103
3. Senior Managers and Certification Regime 104
4. Worker Protection Act 106
5. Proposed Regulation 106
6. Other Proposals 108
F. CONCLUSION 110
4 Executive remuneration in financial firms - Driving behaviour and shaping culture
A. INTRODUCTION 112
B. EXECUTIVE REMUNERATION AND THE RISK-TAKING CULTURE IN FINANCIAL
INSTITUTIONS 115
C. REGULATION OF EXECUTIVE REMUNERATION IN FINANCIAL INSTITUTIONS 121
1. Long-term Incentives 123
(a) Deferral 123
(b) Malus and clawback 125
2. Risk-adjusted and Stability-based Performance Metrics 127
D. EFFECTS OF REMUNERATION REGULATION ON RISK-TAKING 129
E. THE ESG TREND IN EXECUTIVE REMUNERATION 134
F. CONCLUSION 140
5 The Irish Individual Accountability regime and cultural change
A. INTRODUCTION 143
B. SEAR 146
1. Statements of Responsibilities 146
2. Management Responsibilities Map 149
C. CONDUCT STANDARDS 150
D. STATUTORY DUTIES OF RESPONSIBILITY 154
1. Reasonable Steps 155
2. Enforcement 158
E. COLLECTIVE RESPONSIBILITY 160
F. APPLICATION OF SEAR TO NON-EXECUTIVE DIRECTORS 165
G. CONCLUSION 168
6 Professionalism, corporate governance and purposeful culture in banking
A. INTRODUCTION 171
B. HISTORY 174
C. STRUCTURE 178
1. Commercial Banking vs Investment Banking 179
D. PURPOSEFUL CULTURE 181
1. Counter Culture 183
E. CORPORATE GOVERNANCE 185
F. PROFESSIONALISM 187
1. CBI Efforts to Restore Banking Professionalism 190
G. THE DEMISE OF THE BRANCH 191
H. REGULATION 194
I. CONCLUSION 197
7 ESG strategies and their impact on corporate culture
A. WHAT IS ESG? 200
B. THE KEY TENETS OF COMPANY CULTURE 201
C. CSR: AN INEFFECTIVE ADD-ON 203
D. THE EMERGENCE OF 'ESG' 204
E. THE 'G' OF ESG 206
F. THE IMPACT OF ESG ON CULTURE 209
1. Trust and Transparency 209
2. Values 211
3. Purpose 215
4. People 215
CORPORATE GOVERNANCE AND CULTURE IN FINANCIAL INSTITUTIONS
5. Innovation 217
6. Boards and Executive Leadership 218
G. STRATEGY NOT TACTICS 220
H. THE DAWNING OF A NEW FINANCIAL SERVICES CULTURE 223
I. CONCLUSION 225
8 Purpose-led companies in financial services - A case study
BE HELPFUL. AND KIND. THE END. 227
A. SOCIETY TODAY 228
1. The Incumbent Finance Sector 228
2. Disparity between Rich and Poor 229
3. Just How Rich Is the UK? 230
4. Is the UK Happy? 231
5. How Does Money Make You Feel? 232
6. A Bit of Corporate Governance 233
7. The UK's Online and Mobile Bank Transfer System - The Faster Payments Scheme 234
B. THE NEXT LAYER OF PAYMENTS INNOVATION 235
1. The Impact of Open Banking 236
2. The Limitation of the CMA Order and the Need to Expand Open Banking 237
3. Competing with Cards 239
4. The PSR's 2023 Christmas Present 241
5. What's the Case for Purpose? 241
C. ORDO'S STORY 243
1. The Past 243
(a) The Faster Payments Access project 243
(b) Turkeys voting for Christmas 244
(c) The governance project 246
2. The Present 248
(a) The origins of Ordo 248
(b) Our Purpose and financial wellbeing 249
(c) As academics and regulators would say: 'Operationalising Purpose' 250
(d) The inside story on Purpose-driven companies 251
(e) When the going gets tough, the Purpose-driven stick with it 254
3.THE FUTURE 255
D. REFLECTIONS 256
1. Beyond the Web Page 256
2. How to Do Things Differently and Be Believed 257
3. Customer Attraction 260
4. Is Being Purpose-driven a Winner? 261
9 Internal compliance, risk management, and their impact on culture in financial firms
A. INTRODUCTION 262
B. AN ORGANISATION FRAMEWORK OF INTERNAL COMPLIANCE IN FINANCIAL
INSTITUTIONS 265
1. Risk Management Frameworks in Financial Institutions 267
C. TOWARDS A DEFINITION OF REGULATORY CULTURE IN FINANCIAL SERVICES 269
2. How Does 'Good' Culture Look for Compliance Departments of Banks? 271
D. INSIGHTS FROM THE ECB ON RISK CULTURE 272
E. RECOMMENDATIONS FOR A SOUND RISK CULTURE IN COMPLIANCE DEPARTMENTS 278
F. CONCLUSIONS 282
10 Banks' anti-money laundering efforts - The role of RegTech and AI and culture
A. OVERVIEW 285
B. CATALYST FOR AML COMPLIANCE IN BANKS 287
C. IS REGTECH/AI THE ANSWER TO COMBATING FINANCIAL CRIME? 290
D. IS POOR CULTURE HINDERING THE FIGHT AGAINST FINANCIAL CRIME? 295
1. Culture of Tick-box 295
2. Culture of Resistance to Change 298
3. Culture that Does Not Instil a Sense of Responsibility for AML 300
4. Culture of Optimism 303
5. Culture of Gaming the Rules 305
6. Culture of Minimal or Non-compliance 306
7. Culture that Prioritises Revenue Generation over Market Integrity 309
E. CONCLUSION 311
11 New technologies, corporate governance and culture
A. INTRODUCTION 312
B. CORPORATE GOVERNANCE AND CORPORATE CULTURE IN THE FINANCIAL SECTOR 314
1. Corporate Governance (in the Narrow Sense) 316
2. Corporate Culture 323
C. THE IMPACT OF NEW TECHNOLOGIES 326
1. Measuring Corporate Culture using Machine Learning 329
2. Changing Corporate Culture: ML-Informed Appointments to the Board 334
D. CONCLUSION 338
12 Future developments
A. THE RISE OF CULTURE 340
B. THE CLIMATE EMERGENCY AND CULTURE AND GOVERNANCE IN THE FINANCIAL
INDUSTRY 342
C. TECHNOLOGICAL DISRUPTIONS AND THEIR IMPACT ON BANK GOVERNANCE AND
CULTURE 343
D. PROFESSIONALISM AND REGULATION 346
